Energy Market Analysis - 10-06-2015

Spot power prices have moved down this morning as temperatures are set to improve and wind and hydro generation forecasts have been revised higher for the coming days. However, some nuclear units have had their restarts delayed following maintenance and prices are expected to stabilise this afternoon. Gas prices moved higher yesterday on the back of rising Brent, erasing the morning's losses. Flows via the UK interconnector fell to 0mcm this morning, while temperatures are set to remain warm for the next few days which has helped prices to move down. Today's prices can also be found in an easy to read table on our 'current UK energy price'page.

How did the energy markets close?

Gas contracts decreased yesterday morning as the UK market is set to be oversupplied with today's halt in exports to Belgium due to interconnector maintenance. Meanwhile, Day-Ahead fell by around 1ppt due to a warmer weather forecast. However, a sharp rise in oil prices supported prices in the afternoon and resulted in an upward movement on the gas curve. Power contracts followed their bullish gas counterparts yesterday afternoon and cancelled out Monday's losses. The effects of warm weather were offset by a drop in wind generation, with levels expected to fall as low as 1.3GW today.

How did the energy markets open?

Improved Norwegian supply helped to weigh on gas prices this morning, assisted by a scheduled LNG delivery at the end of the month. Elsewhere, storage injections are currently high in preparation for maintenance in the next few weeks. Stronger Brent has offered support but the outlook for prices is generally bearish due to healthy supply. Power prices are on the decline due to lower demand levels, while wind generation has also been revised higher in the coming days. A rise in fuel prices provided some upward pressure on the far-curve but fundamentals are generally bearish.

1-year forward prices

Market close data has revealed that the 1-year forward price for both commercial gas & commercial electricity increased - closing at 47.17ppt and £45.23/MWh, respectively. This can be seen in the graph below.

Note: Brent Crude prices are taken from opening market data, and do not represent the price as it changes throughout the day.

Latest Brent Crude Price

Brent 1st-nearby prices displayed a significant increase overnight, adding over $2.50/b to their price to trade above $65.4/b. Yesterday's EIA report displayed a stronger 2015 oil demand growth forecast and this was the main driver of prices.